All else the same, if you decrease ﬁxed costs, cash break-even will also decline.

Question

Quizplus · Accepted Answer

This statement is true. Fixed costs are costs that do not change with the level of production or sales, such as rent, salaries, or insurance. By decreasing fixed costs, the breakeven point - the level of sales or revenue at which a company starts to make a profit - will also decrease. This means that the company will need to generate less revenue to cover its costs and avoid losses. As a result, the cash break-even point - the level of sales needed to cover all cash expenses, including interest, taxes, and capital expenses - will also decline.

All Else the Same, If You Decrease ﬁXed Costs, Cash